Fintech Companies in Colombia: an investment opportunity with potential growth

The IDB analysis indicates that three out of five Fintech companies were established between 2014 and 2016 in Colombia, reflecting the potential of the sector. More regulations are being created regarding this trend but still a more defined legal system needs to be created.

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Fintech is a word that comes from finance and technology and it has become a term for naming companies that offer financial products and services through information and communication technologies, such as websites, social networks and mobile applications.

These financial companies operate as intermediaries in money transfers, loans, purchases and sales of financial securities, and financial advice. They also develop the following business areas:

  • Payments and remittances
  • Loans
  • Management of business finance
  • Management of personal finances
  • Crowd funding
  • Investment management
  • Insurance
  • Financial education and savings
  • Credit scoring solutions
  • Identity and fraud
  • Trading

Furthermore, Fintech companies have also helped new businesses with loans for their creation through crowd funding; big data and financial information management and payments are also other segments that Fintech companies have worked with.

Global investment in Fintech has grown from USD 930 million in 2008 to USD 22 billion in 2015. In 2016, investment continued to grow at an unexpected market rate, only in the first quarter of the year it exceeded USD 5.3 billion. The 2016 incomes where catalogued as an increase of 67%, in only one year compared to the previous ones.

Colombia, has been ranked third among the countries in Latin America that have created financial companies based on technology platforms. This data has been revealed by a recent report from the Inter-American Development Bank (IDB), that identified at least 703 projects of this kind, from which Brazil has 230, Mexico 180 and Colombia 84 initiatives.

The Fintech Colombian market outstands from other Latin American countries due to the special emphasis (45% of the cases) on working with small and medium-sized enterprises, and with excluded or underserved consumers of the financial sector.

The IDB analysis indicates that three out of five Fintech companies were established between 2014 and 2016 in Colombia, reflecting the potential of the sector. More regulations are being created regarding this trend but still a more defined legal system needs to be created.

Despite the rapid expansion of Fintech, there are two aspects that have prevented an even faster growth. First, investors are hesitant on Fintech due to the security in personal information online, since it could be easily stolen by third parties and used for fraud. For this reason, many fintech companies have made deals with major cyber security companies like Norton or McAfee. Second, as fintech manages crowd funding, common people can put their money in the web and fintech distributes it without knowing if the investment might come from money laundering.

Due to these uncertainties, the Financial Regulation Unit of the Ministry of Finance of Colombia proposed a regulatory agenda for 2017, with the purpose of becoming the first Fintech-friendly country in Latin America, and to position Colombia in the world map of innovation and financial technology as one of Fintech’s three main strategic hubs in the region.

The Association of Fintech Companies of Colombia known as Colombia Fintech, presented in October 2017, a series of proposition such as implementation of consumer protection agreements that promote greater clarity on rates, costs and fees such as management fees, technological charges and other costs that do not count as interest. They have also expressed the interest on guarantees for risk mitigation in Online Credit operations.

Colombia Fintech is aligning regulatory interests and oversight mechanisms with the government that are focused on promoting a unique customer vision and innovation in financial products and services. A major review from the government in new financing vehicles through crowd funding that enables the entry of international platforms.

The new proposed law establishes the importance of regulating the operation of the alternative financing structure, aimed mainly at small and medium-sized companies, in a secure environment for the participants. Also, the government will be reviewing international standards and best practices to improve e-commerce transactions in Colombia.

Finally, it is important to mention that ‘Fintech’ is a market that is consolidating and has a great potential for growth. Colombia Fintech continues to work on the laws, best practices and latest technologies to offer greater security. It is also appealing for people to invest in Fintech as their services are sometimes less expensive and more efficient than those offered by traditional banks.

For more information on Fintech and investment, contact us.

Puntuación
Posición en Iberoamérica
1
Juan Esteban Saldarriaga
Vice President at Alianza FinTech Iberoamerica | Co-Founder Rapicredit | ColombiaFinTech.co
24.4
5
2
Edwin Zácipa
Executive Director at Colombia FinTech | Managing Partner MiBank.co | Founding Member FinTech IberoAmérica
20.4
17
3
Diego Molano
Consultor internacional en temas de TIC e innovación
19.4
18
4
David Velez
Founder and CEO at Nubank
17.0
27
5
Martin Schrimpff
Co-Founder of Zinobe | Founder of PayU | Founder Pagosonline.net
15.6
32
6
Ángel Sierra
Director Ejecutivo en Asociación FinTech e InsurTech de Chile | Member of Alianza FinTech Iberoamerica
14.8
39
7
Paula Cardenas
Business Manager at AEFI | Founder Member FinTech IberoAmérica
14.5
42
8
Clementina Giraldo
FinTech & AgTech in Latin America
11.8
60
9
Juan Francisco Schultze-Kraft
Board Member – Vicepresident at Colombia FinTech | PayU Legal
11.4
63
10
Daniel Rojas
CEO & Co-Founder at Rocket.la
10.1
69
11
Alan Colmenares
Digital Transformation Enablement – Latam at Microsoft
7.3
89
12
Laura Gaviria Halaby
Global Head FinTech Acceleration at Citi | Chief Acceleration Officer at TheVentureCity
6.3
101
13
Diego Alejandro Guzman Guevara
CEO and Co Founder at Bankity
6.2
104
14
Andres Ramirez Sierra
CEO at Banlinea LATAM
6.2
105
15
Daniel Navarro
CEO & CoFounder at NIMMÖK
6.1
109
16
Fernando Sucre
CEO at ComparaMejor
5.9
110
17
Andres Villaquiran
Founder & CEO Alkanza
5.3
119
18
Carlos Castañeda Olaya
Open innovation leader at Accenture | Country Manager at Wayra
5.2
123
19
Marisol Camacho
Director of Corporate Relations at Bancóldex | Director of Mindset at iNNpulsa Colombia
4.6
131
20
Felipe Valencia
Partner at Veronorte
3.7
143
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Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Colombia Fintech, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la Asociación. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.